Fraud in hotels & the hospitality sector

In the hospitality and hotel sector, losses as a result of fraud can be as high as 8% of turnover. Fiona Hotston Moore, Partner at Ensors Chartered Accountants, shares her expertise on how to spot, and hopefully therefore avoid, fraudulent behaviour within the hospitality industry.

On average, one in four businesses suffers losses due to fraud every year and, because the hospitality and hotel sector has high staff turnover and cash takings, the risk of fraud is even higher.

Fraud can be perpetrated by guests, suppliers or staff

Fraud by guests tends to involve the use of stolen credit cards or theft of the hotel property.

Fraud by suppliers can include:

• Bribes to employees
• Fixed or cartel pricing
• Non-disclosure of conflicts of interest
• Unauthorised use of assets

Fraud by staff can include:

• Theft of business assets including stock or cash takings
• Forged expense claims
• Falsified references or fraudulent CVs
• Favouring suppliers who offer inducements
• Payroll fraud including failure to remove ex-employees, fraudulent sick claims or forged overtime
• Misstated financial results possibly to inflate bonuses
• And typically, if fraud goes unchecked the perpetrator will get greedier so what starts as “petty” theft can quickly escalate into significant sums.

How can you spot fraud and/or prevent it taking place?

• Carry out reconciliations and follow up differences (even the small ones)
• Segregate duties across all operational aspects of a business including payroll, purchasing, sales and accounts
• Put a formal process in place to support ‘whistle blowing’
• Regular inventory and stocks checks including random unscheduled checks.
• Implement physical controls and IT security
• Have regular internal audit checks. These can be carried out by an external audit firm if you don’t have the skills in house.
• Train your managers.

The typical internal fraudster is, usually, the “loyal” and “hard working” employee who has worked for the business for many years and is trusted. When personal circumstances change, and where the opportunity exists, employees may perpetrate fraud often rationalising their actions.

If fraud is suspected we recommend prompt investigation by an independent party who can work alongside your HR function.

For information on how Ensors can help investigate internal fraud please contact Fiona Hotston Moore.